Unit 3: Creating Competitive Advantage
The success of a strategy depends on the firm's competitive advantage, or whether its position in a competitive market allows it to achieve its goals, which might include higher returns on investments, greater efficiency, or superior effectiveness compared to competitors. What sets your product or service apart from the competition? Two generic strategies for developing a competitive advantage are cost leadership and differentiation. Cost leadership is a strategy that Walmart follows. This company aims to offer the lowest prices to draw in customers. Differentiation is a strategy designed to make your product or service so unique that it stands out from the competition in a desirable way to a target market. Nintendo launched the Wii video game console by differentiating its product with motion-sensitive controllers. This company pursued a cost leadership strategy in conjunction with this differentiation strategy.
There are many ways to achieve a competitive advantage, and they all require a focus on the competitors. It is essential to keep this in mind when studying this unit. This unit's primary takeaway should be the concept of sustainable competitive advantage. As soon as your competitors see your strategy working, they will either copy or leapfrog it. Sony immediately attempted to copy Nintendo by developing its own motion-sensitive controllers, and Microsoft has moved to motion recognition via cameras. Sustainable competitive advantage involves not only jumping ahead but staying there.
Completing this unit should take you approximately 2 hours.
Upon successful completion of this unit, you will be able to:
- explain the meaning of competitive advantage;
- describe the factors that create competitive advantage;
- apply Total Quality Management to strategic management principles as a best practice
3.1: Competitive Advantage
Watch this mini-lecture on the generic strategies companies use to develop a plan for competitive advantage.
Read this article and then watch the video, which breaks down the reality that many organizations fail to fully identify their competitive advantage. Start to think about how you might understand or explain your organization's competitive advantage and how to leverage those attributes for growth and sustainability.
After you read this section, think about the role of the value chain in strategic management. How does the use of a value chain impact the distribution of goods in the marketplace? Also, consider the future of value chains as a strategy for business managers after the global pandemic of 2020.
3.2: Types of Competitive Advantage
Review this article that explains models of competitive theory. Consider the historical origins of competition and the desire for organizations to gain a competitive edge in the marketplace. Review the account of using a value chain to develop the organization's sustainable competitive advantage.
After you read this section on Porter’s competitive strategies, watch the video for examples of how to apply them in a business environment.
Read this section on "generic strategies" and review the video discussing how many companies implement them. Complete the exercises at the end.
This presentation explains the Delta Model as a tool for competitive advantage by identifying business competencies in three different areas: system lock-in, total customer solutions, and best product. The primary focus for using this tool is the customer. Consider the value the customer places on the product or service and how your organization plans to meet those expectations.
3.3: Total Quality Management
Read this section and watch the video on supply channel models, which discusses how strategic managers can apply a process to sustain a competitive advantage by creating high-quality products and reducing costs. Start to think about how you would use the supply channel model as a strategic manager.
Study Sessions
These study sessions are an excellent way to review what you've learned so far and are presented by the professor who created the course. Watch these as you work through the unit and prepare to take the final exam.
We also recommend reviewing this Study Guide before taking the Unit 3 Assessment.
Unit 3 Assessment
- Receive a grade
Take this assessment to see how well you understood this unit.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.
- View
Use this activity to practice contextualizing the information you've learned in Unit 3. Once you submit your answer, evaluate it using the provided guide to responding.